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Reverse Mortgage Myths

You may have heard or read about the potential downsides of reverse mortgage programs. Much of the information circulated online and by inexperienced mortgage loan officers is simply inaccurate. Below is a list of popular reverse mortgage myths and a brief explanation as to the truth behind the following statements:

You must have excellent credit to qualify for a reverse mortgage.

Completely untrue. Reverse mortgage underwriting guidelines do not take into account a home owner’s  income or debt.

You can become upside down on your loan and end up owning more than your home is worth.

Home owners and their heirs will not be required to ever pay back more than the value of the home.

The bank will become the owner of the property when they close.

Just as is the case with a traditional loan, the home owner retains ownership of the property and the mortgage is simply a lien against the property. Most people prefer to “Age In Place.” A reverse mortgage or credit line can make it easier to remain in your home longer with less stress. You always retain 100% ownership of your home, and since a reverse mortgage is non–recourse, you or your beneficiaries cannot ever owe more than the value of your home. Any losses are absorbed by the federal government. Any remaining equity always passes to you or your heirs.

You must own your home outright in order to qualify for a reverse mortgage.

A reverse mortgage or credit line is designed for seniors with substantial equity (about 45% or more). The home does not have to be free and clear or paid off in full. Only homeowners age 62 and higher who live in their homes more than six months of each year can qualify for this safe, federally insured program.

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Reverse mortgages are extremely costly.

The vast majority of reverse mortgages are FHA HECMs, which are heavily regulated by HUD and the Federal Housing Administration. Closing costs are typically only about 1% higher than their traditional mortgage counterparts. Still, reverse mortgages are not for everyone and it is important to speak with a reverse mortgage professional to better understand the benefits and costs associated with reverse mortgages.

Please keep in mind that the reverse mortgage industry is consistently changing and some of the information contained on this site may not be current. Please ask a licensed reverse mortgage professional for up-to-date guidelines.

Find additional information on common misconceptions associated with reverse mortgages  >

Also, check out our page on Reverse Mortgage Horror Stories and How to Avoid Them >

Learn more about how people are using home equity conversion mortgages for purchasing homes:

Please keep in mind that the reverse mortgage industry is constantly changing and some of the information contained on this site may not be current. Please ask a licensed reverse mortgage professional for up-to-date guidelines.